Japan Sets Handling Fee for Solar Project Bidding System

2017/08/12 03:50

Kenji Kaneko, Nikkei BP Intelligence Group, CleanTech Institute

Japan's Ministry of Economy, Trade and Industry (METI) announced Aug 8, 2017, that the handling fee to be paid by a participant in the bidding system for solar power generation projects is ¥127,000 (approx US$1,163) per project.

The bidding system for solar power generation projects was established because of the revised feed-in tariff (FIT) policy that was implemented April 1, 2017. It is targeted at 2MW and higher-output solar power plants, and the first round of the bidding will take place from Oct 27 to Nov 10, 2017.

To participate in the first round of the bidding, it is necessary to submit a project plan until Sept 15, 2017, and pay the announced handling fee (¥127,000) until Sept 22, 2017. The fee will cover the designated institute's cost for bidding operations. It needs to be paid regardless of the capacity to be bid and is not returned. At first, METI said that the fee will be several hundreds of thousands of yen per project. So, it can be said that the announced fee is relatively low.

As for the bidding system, METI defines the first three years (starting from fiscal 2017) as a trial period, expecting that 1-1.5GW of projects will be bid in three rounds of bidding. In fiscal 2017, METI will call for 0.5GW of projects with a maximum bidding price of ¥21/kWh.

Bidders are required to pay deposits after submitting a project plan and obtaining a permission to participate. The "first deposit," which needs to be paid before a bidding starts, is ¥500/kW, and the "second deposit," which a winning bidder pays before applying for certification, is ¥5,000/kW. A winning bidder can deduct the first deposit from the second deposit, which will be ¥4,500 as a result.

The deposits are for guaranteeing appropriate bidding. If a participant cannot win the bid, the first deposit is paid back. The second deposit will be paid back after the winning bidder starts operation of a solar power plant. However, if the plant does not start operations until the date described in the project plan, all of the second deposit will be confiscated.

Because the handling fee was set, the cost for participating in the bidding system has almost become clear. While the fee became lower than expected, if a bid is made for a 10MW project, the deposit is ¥50 million in total, causing an interest cost until it is returned. If the bid is not successful, the handling fee and the interest become a direct economic loss.